J.P. Morgan says Perrigo Company plc’s (NYSE:PRGO) first-quarter 2025 earnings will be dominated by commentary on the potential impact of tariffs. The analyst says, “Tariffs could potentially have a significant impact on PRGO’s near-term earnings.”

Analysts forecast adjusted earnings of 55 cents per share, with sales of $1.09 billion.

Analyst Chris Schott says tariffs could lead the OTC drugs company to a low to mid-single-digit impact on global COGS on an annualized basis, and that the company expects to offset this impact with supply chain efficiencies and price actions.

Also Read: Perrigo Outlines 2025 Growth Plans, Projects Sales Boost And Margin Expansion By 2027

This mainly affects the oral care business, some of which is sourced from China, and the infant formula business, which uses ingredients from both China and India.

The company originally expected to reduce the impact through supply chain improvements and price increases. However, a few challenges remain:

• Tariffs on Chinese products have gone up significantly since April 2.
• It’s still unclear how pharmaceutical tariffs will turn out, and any tariff on ingredients could affect Perrigo.
• The company’s price hikes have usually lagged behind rising costs.
• Since PRGO operates with lower profit margins than its peers, it’s harder for them to absorb these extra costs.

Schott says it’s hard to predict the short-term impact on Perrigo’s business, since higher costs without raising prices could hurt its earnings. However, the company is expected to pass most of those cost increases on to consumers, so any effect on its earnings beyond 2026 should be small.

“Net-net, while tariffs will clearly impact near-term earnings (which is obviously less than ideal with PRGO just seeing a rebound in earnings following its 1H24 nutritional headwinds), we anticipate the company to be able to largely offset said impact by 2026,” Schott writes.

Price Action: PRGO stock is down 4.70% at $24.13 at the last check Monday.

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